New York judge denies Novig injunction, rules sports event contracts are not swaps

U.S. District Judge Colleen McMahon denied Novig's request for a preliminary injunction against New York on Nov. 10, leaving the state free to require the prediction market to obtain a gambling license or stop listing sports contracts. In a 35-page opinion, she found that Novig was unlikely to show that its sports event contracts are swaps under the Commodity Exchange Act, which is the claim the company used to argue that federal law overrides New York's gambling rules. The opinion and order came in Ludlow Exchange, LLC v. James, case number 26-cv-6676 in the Southern District of New York.

Novig, operated by Ludlow Exchange, sued in August after New York officials moved against event-contract platforms. The Commodity Futures Trading Commission designated Novig as a federal contract market in June 2026, and the company began offering sports-related contracts to customers in New York that August, according to the opinion. New York generally bars an entity from making a mobile sports-wagering platform available in the state without a state license. Because Novig had not shown a likelihood of success on the merits, McMahon wrote, she did not reach the other injunction factors, Bitcoin News reported.

The Commodity Exchange Act covers agreements whose payments depend on an "event or contingency associated with a potential financial, economic, or commercial consequence." McMahon agreed that the result of a game is an event, but she reasoned that the statute targets the hedging of price risk rather than recreational betting. "From the perspective of the customer, there is no qualitative difference between Novig's product and FanDuel's traditional sports bet," she wrote, Unchained reported. The court quoted Novig's own marketing in the opinion, including the company's line that its "north star is to be the largest sports betting platform in the world," and added in a footnote that Novig makes money "by charging two suckers a fee for the privilege of betting against each other on its platform."

McMahon also rejected Novig's argument that it cannot obey both state and federal law, calling the claim "ridiculous," the opinion shows. Novig could seek a New York license and use geofencing to serve only customers physically in the state, she wrote, and the company held a Colorado betting operator license in 2023 before returning it.

Even if the contracts were swaps, the judge continued, federal law bars states only from regulating the licensing and operation of exchanges, not from applying their gambling laws to them. That alternative holding lets New York proceed with its licensing demand no matter how the swap question is resolved on appeal.

The ruling gave no deference to the Commodity Futures Trading Commission. In October the agency issued an interim final rule keeping sportsbook bets and other casino-style wagers outside the swap definition, alongside a proposed rule that would treat sports event contracts as swaps. The two actions "are inherently contradictory and cannot be reconciled," McMahon wrote, and the agency's "sudden change in its longstanding position that sports wagering activity is the province of states appears calculated to influence the outcome of the ongoing litigation on this very issue." She added that the CFTC's current rule, 17 C.F.R. section 40.11, itself bars listing event contracts that relate to gaming, so the conflict Novig described does not exist.

The judge was blunter about an Aug. 11 CFTC order that directed Kalshi to keep operating while New York pursued it. "The Kalshi Order smacks of a collusive effort between a regulator and regulatee to generate a claim for conflict preemption," she wrote. The order followed a notice from Kalshi itself on Aug. 1 warning of a "market emergency" if New York obtained a restraining order, Bitcoin News added.

Novig filed a notice of interlocutory appeal to the Second Circuit the same day as the ruling, the opinion's docket shows, and Unchained noted that the appeals court had declined earlier this month to pause New York and Connecticut actions against Kalshi and Coinbase. The Second Circuit has said a merits panel will take up the same question over whether sports event contracts fall within the CFTC's swap jurisdiction. The clerk of court was directed to terminate Novig's motion at docket entry 23.